As with other federal agencies, the Patent and Trademark Office enters the 2011 fiscal year without its annual appropriations and continues its operations thanks to a continuing resolution (H.R. 3081) that extends government funding until December 3rd at 2010 appropriations levels.

Beyond the need for new appropriations, the PTO also needs the authority to spend its fee revenue up to the amount collected in fiscal year 2010. As a fee-funded agency, the PTO’s appropriations are based on its projections of fee revenue made at the beginning of the fiscal year. The 2010 appropriations provided $1.88 billion for PTO expenditures, but after enactment the PTO estimated that it would take in $200 million more. Although supplemental funding legislation provided an additional $129 million, there remains approximately $70 million in PTO revenue that it is unable to spend.

AIPLA, together with the ABA Section of Intellectual Property Law and the Intellectual Property Owners Association, last week addressed a letter to Congress expressing disappointment that the $70 million shortfall was not addressed by the continuing resolution legislation. AIPLA continues to urge Congress to establish a mechanism to ensure that all of the user fees the USPTO collects remain at the Office, thus stabilizing and adding much-needed predictability to the United States’ intellectual property system.

AIPLA President Alan Kasper stated that “The time has come for Congress to provide the USPTO with the ability to more predictably and intelligently plan its fiscal operation by once and for all ending the possibility of fee diversion. This year’s funding represents an example of the problem. Given the importance of our intellectual property system as a key economic driver that attracts and protects investment in new technology, our country’s innovators who pay the fees deserve no less.”

President Obama on September 29, 2010, nominated Jimmie V. Reyna, an international trade lawyer with the Williams Mullen firm, to serve on the Federal Circuit, filling the seat of Judge H. Robert Mayer who took senior status this year.

Reyna’s nomination addresses the last of three vacancies on the court, following the nominations of District Judge Kathleen McDonald O’Malley last March to fill Judge Alvin Schall’s seat and Edward C. DuMont last April to fill Judge Paul Michel’s seat. Judge O’Malley’s nomination was approved by the Senate Judiciary Committee September 23, 2010, but the committee has yet to hold a hearing on the DuMont nomination.

Click here to read the White House announcement of Reyna’s nomination; click here to read Reyna’s bio on the Williams Mullen web site.

Some of the most significant legislation in the rapidly concluding 111th Congress, most notably patent reform, continues to remain in the wings, hopefully awaiting consideration in a lame duck session.

Since its approval by the Senate Judiciary Committee in April of 2009, the patent reform bill (S. 515) has managed to muster additional supporters in both industry and in Congress. However, the bill has not been able to get to the Senate floor in part because of efforts by opponents and in part because of other matters competing for the Senate’s attention. Should S. 515 pass the Senate in the lame duck session, it would still face the hurdle of House passage.

Other Pending Bills

Other IP legislation that has had difficulty getting traction includes:

Online counterfeiting (S. 3804), introduced September 2010: allows the government to initiate an in rem action against websites that are dedicated to making infringing goods and services available; provides safeguards allowing the domain name owner or site operator to petition the court to lift the order. To read S. 3804, click here; to read the Senate floor remarks on the introduction of S.3804, click here.

Reverse payments (S. 369, approved by Senate Judiciary and incorporated into Financial Services legislation (S. 3677)): would a new Section 28 to Title 15, entitled “Preserving Access to Affordable Generics”; would create a presumption of anticompetitive effects from an agreement between a patent owner and a generic drug maker seeking FDA marketing approval if the evidence shows that an ANDA filer received “anything of value” and agreed to forego R&D or marketing “for any period of time.” The presumption would not apply if the evidence showed the pro-competitive benefits of the agreement outweigh the anticompetitive effects of the agreement. To read the relevant provisions of S. 3677, click here.

Technical copyright bill (S. 3689, passed by Senate August 2, 2010): repeals the expired “manufacturing clause” at 17 U.S.C. §601, and clarifies that (1) the copyright owner has the right to transfer or license any particular exclusive right, (2) the regulations of the Copyright Royalty Board are subject to the approval of the Librarian of Commerce and are subject to judicial review, and (3) the 1997 reversal of La Ciegna Music Co. v. ZZ Top, 44 F3d 813, 33 USPQ2d 1437 (9th Cir. 1995), i.e., that pre-1978 sales of phonorecords do not constitute a publication of the underlying work, be it a musical, dramatic or literary work. To read the Senate floor remarks on S. 3689, click here.

Enacted Legislation Thus Far

Below are several IP bills that were carried through to enactment:

Biosimilars patent legislation (included in enacted health care bill H.R. 3590; Pub. L. 111-148): designed to create an expedited approval process in the Food and Drug Administration for follow-on biological products similar to the procedure for drugs under the Hatch-Waxman Act; in addition to extensive patent provisions at 42 U.S.C. 262(l), Section 271(e)(2) of Title 35 is amended to create a technical act of infringement for applicants seeking Public Health Service approval of a biological product which may be covered patents. To read the biosimilars provisions of Pub. L. 111-148, click here.

Trademark technical amendments (S. 2968; Pub. L. 111-146): allows deficient affidavits filed under the Madrid Protocol to be corrected after the statutory time period, and provides a 6-month grace period for filing an affidavit of continued use for a Madrid Protocol extension of protection. To read the Senate floor proceedings on the trademark technical amendments, click here.

Renewal and amendment of satellite compulsory license bill (S. 3333; Pub. L. 111-175): to create a new sunset provision of December 31, 2014, for the satellite providers’ compulsory license at 17 U.S.C. 119, and to make a wide variety of updating amendments to the license. To read the satellite license renewal bill, click here.

AIPLA on September 27, 2010 filed comments with the PTO on the agency’s “Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos.” Last June, the Supreme Court in that case rejected the Federal Circuit’s “machine or transformation” test as the sole test for deciding patent eligibility for process claims, and rejected the contention that business methods are categorically excluded from patentability.

The AIPLA comment letter commends the PTO for its prompt action in developing the Bilski Guidance. In particular, the letter singles out the statement that “examiners should avoid focusing on issues of patent-eligibility under §101 to the detriment of considering an application for compliance with the requirements of §§ 102, 103, and 112, and should avoid treating an application solely on the basis of patent-eligibility under § 101 except in the most extreme cases.”

The letter notes that this view is supported by the Court’s Bilski opinion, which recognized that the Judiciary does not have carte blanche to impose limitations inconsistent with the statute. The letter advised as follows:

The primacy of the statute justifies a complete examination for the statutory elements (qualifying under one of the listed categories, utility, novelty, nonobviousness, written description, enablement and definiteness) before—or at the same time as—consideration is given the judicially created exceptions under section 101. An examination including the statutory factors can and should catch any dubious claims that would be ineligible under the judicially created exceptions.

In the spirit of bringing AIPLA members news of the most current and noteworthy developments in IP law, AIPLA Reports invites readers to submit email notices of those developments and court opinions that could be of interest to other practitioners. Please forward the notices to Aipla_Reports@aipla.org.

AIPLA Reports is the proprietary material of the American Intellectual Property Law Association and may not be copied, distributed, or posted on the Internet without permission. The reports are provided to AIPLA members as an Association benefit and are meant to encourage non-members to join the Association. Authorization to make copies of selected material may be obtained by sending requests to Meghan Donohoe, Chief Operating Officer, at mdonohoe@aipla.org.